Friday, April 18, 2014

Open Letter to East Bay Sellers: “Please, Raise Your List Price”

Yep, I said raise your list price. Some real estate professionals can’t believe
that these words would come out of another agent’s mouth. The more common challenge is getting a
reasonable and marketable list price from an emotionally attached Seller. (Everyone tends to think their home is the
best on the block, myself included.)

Enter the East Bay Real Estate Market, where low inventory
translates to multiple offers. Some say
you can’t price a home too low in this hot market as the price will
self-correct upwards and then some when the bidding war happen. This is not an absolute truth. Seeing multiple offers all around has us thinking
that Sellers may in fact need a new strategy.
Here are our reasons for asking Sellers to increase their price:

1.It’s
Worth It! Not to overstate the obvious, but we are in a booming market. We started talking to some of you a while ago
when you first thought about putting your home on the market. While you may
have had a price in mind based on that initial conversation, it is time to
revisit the recommended sale price. Your home is likely worth more.

2.You Might
Be Missing the Mark. Too low a list price may put the property below the
range of its targeted buyer. If you
expect a million dollars for your home, you can’t sell it at a bargain basement
price. Buyers who are qualified to spend
$1,000,000 may start looking a bit lower--but not substantially so. After all, they want a million dollar house, so
why should they start looking at homes in the $700s? If you list your million dollar home at
$700,000, and the buyers looking at it can only afford $800,000, you may miss
your audience. To increase your odds for
success, price your home within 10% of your targeted sales price.

3.Bidding Wars
Don’t Always Bring the Top Price. Everyone in this office has heard stories
of the houses that sold for two times the asking price. These are specific anomalies that, because of
their freakish nature, gain the most buzz.
They are not the rule. In markets
where homes sell repeatedly with multiple offers, more predictable patterns
begin to emerge. A general pattern might
be noticed, for example, whereby a home with three offers may go over asking by
10% or so, whereas a home with 14 offers may go over asking by 30% or more. These overbids tend to cap out by about 40%
when buyers begin to step down from the competition based on affordability or
perception of a property’s value. Here’s
how the numbers could affect you: if you price a home worth $600,000 at
$400,000, you may get lots of offers based on the unbelievably low price (not
surprisingly, many bargain hunters are included in this group). However, those offers may top out at about
$560,000--40% over--even in the spontaneous bidding war. It may be worthwhile
to instead start at an asking price of $550,000, get a few offers, and eventually
sell at $605,000 (while only 10% over, still a higher net than the previous
example) . This is tricky because most Sellers still see the sheer numbers of
offers as proof of success—and not the potential net.

4.Breaking
Hearts Isn’t Easy. It is often fun
to put on a good show and charm dozens of buyers into writing fabulous offers. It feels especially nice to field all the
love letters that come in telling you that your home is the only one on the
planet that could house their future memories.
But there is an emotional letdown that happens after the 24 offers are heard. The heartache comes when you have to tell 23
buyers—all of whom fell madly in love your home—“we’re just not that in to you.” Heartbroken buyers get fed up watching the
homes they like close at 30% or more over the price they saw at the open house. This frustration, if left unchecked, actually
begins to force Buyers out of the market and onto the sidelines. This could end up tamping your ability to
receive offers. We have gotten calls
from clients who won’t make an offer while under fierce competition from other
buyers.

5.Tell Me What
You Want, What You Really, Really Want… Perhaps the best argument for a
higher price is based on your own instinct and the price you are ultimately willing
to accept. This determination should come
after a frank and realistic conversation with your agent about where the value
truly lies. Assume you only get one
offer (and it does occasionally happen in the East Bay), can you take it? If the answer is a quick “no,” your price is
not realistic and should be revisited.

Price is the most important marketing decision related to
the successful sale of your home.
Deriving the right listing price is complex. If you would like to speak to an expert about
the best strategy to maximize your home’s value, please reach out to one of our
experienced agents.